On June 27, 2016, Governor Jerry Brown signed SB 833. The bill greatly reduces the scope of California’s Medi-Cal Estate Recovery against the estate of the deceased. Effective January 1, 2017, more Medi-Cal recipients can now leave an inheritance to their family without having to pay back the State upon their death. Basically, the new law limits the ability of Medi-Cal to pursue the estate of the deceased to recover the costs of their treatment. As of January 1, 2017, Medi-Cal will only be able to pursue assets available in the deceased patient’s probate estate. All assets outside of probate cannot be seized by Medi-Cal.  The question is, with this new law is a Medi-Cal asset protection trust necessary? Read on to learn more.

A trust allows a person to transfer his/her property into the trust to avoid probate. Under federal law, states must recover assets from the estate of the surviving spouse of a deceased Medi-Cal recipient. Medi-Cal could previously seek reimbursement from an estate and assets of the deceased to pay for medical care provided during the his/her lifetime. Medi-Cal could seize any assets within the deceased patient’s estate.

“When my son told me about this new law, I was so excited. I had been referred to A People’s Choice before but they did not prepare that type of trust. Now that I could protect myself with a regular living trust, I contacted them right away!” Helen B.
“Several years ago I had contacted an attorney about a Medi-Cal Asset Protection Trust. I was shocked at the cost and set things aside until I could afford it. Time passed and I was really getting concerned about what would happen to my estate.” Helen B.
“A People’s Choice prepared all my documents. It was so easy. The service was inexpensive and I was able get everything done that I needed to without putting it off longer.” Being 82, I don’t hear so well, but they were very patient.” Helen B.

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What is a Medi-Cal Asset Protection Trust?

Prior to the signing of this law, people were required to set up an irrevocable Medi-Cal Asset Protection Trust if they wanted to protect their assets from Medi-Cal recovery. The irrevocable Medi-Cal Asset Protection Trust was designed to hold assets such as a house and bank accounts separate from the individual’s personal assets so that they would qualify for Medi-Cal Long Term Care Benefits. They also prevented the State of California from Medi-Cal Estate Recovery. The Medi-Cal Asset Protection Trust had to be established far in advance of the person receiving Medi-Cal benefits., If the Medi-Cal Asset Protection Trust was properly set it, it protected a person’s entire estate while still being able to qualify for  Medi-Cal to help pay nursing home costs.

As of 2017, Medi-Cal will only be able to seek reimbursement against assets that are part of the decedant’s probated estate. Fortunately, assets will be protected from Medi-Cal estate recovery if it is transferred to a standard revocable living trust prior to the recipient’s passing. Medi-Cal will not be able to come after your surviving spouse and/or beneficiaries to recover unpaid portions of Medi-Cal care. Assets held in a revocable living trust will avoid probate and Medi-Cal recovery altogether. As a result, the need for a Medi-Cal Asset Protection Trust has diminished.

Key components of the new law known as SB833 include:

  • limits estate recovery to only what the federal government requires.
  • prohibits recovery from the estate of a deceased Medi-Cal member who is survived by a spouse or registered domestic partner.
  • prohibits estate recovery if a home has a fair market value of 50% less than the average price of homes in the county where it is located.
  • Allows Medi-Cal to only recover the costs of a Medi-Cal enrollees’ long-term care and related costs

The Importance of a Medi-Cal Asset Protection Trust

Although the need for an expensive Medi-Cal Asset Protection Trust has diminished, it is critical for Medi-Cal recipients to hold their property in a revocable living trust now that this new law has passed. Assets that are a part of a revocable living trust will not be subject to California’s probate process. This means that the court cannot dictate how trust assets are to be transferred to beneficiaries nor what creditors can receive.

The new law is great news for surviving Medi-Cal spouses and beneficiaries. Assets that are held in a decedent’s revocable living trust will avoid both probate and Medi-Cal estate recovery. It important to note that revocable living trusts offer more protections to the decedent’s intended beneficiaries. Furthermore, they also offer a more comprehensive “what if contingency planning” than holding property in joint tenancy, a life estate or by a Transfer on Death deed.

With this change in California law, surviving spouses and beneficiaries can now inherit their loved one’s assets outside of probate and out of the reach of Medi-Cal. If you are a Medi-Cal recipient without a revocable living trust, have substantial assets, and have not previously set up a Medi-Cal asset protection trust, you should take action to set up a revocable living trust as soon as possible. Doing so will make sure your loved ones receive your assets instead of the State. Contact A People’s Choice for more information about creating a revocable living trust. Call us at 800-747-2780. We can prepare all of your estate planning documents and get them to you within an hour of your interview!

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